"What's going on now is demand is keeping pace with supply. We had 2.8 million sf of positive absorption and 2.7 million sf of space deliveredto the market," says Jerry Holdner, VP of market research for Voit and the report's author. "So developers are happy because they're not overbuilding."
Holdner attributes such a dramatic increase in absorption to new business startups and existing business expansion, rather than business moving into the county.
"You would think that companies are moving here. Some of that is going on, but it's only maybe 10%. It's a small percentage compared tothe technology boom we're seeing," Holdner notes.
The new numbers are a stark contrast to the 111,000 sf of net absorption the county experienced during 1999. The low number reflects the move of large corporations like Flour Corp. and First American Title InsuranceCorp. from leased space to build-to-own. Between the two alone, hundreds of thousands of sf of leased office space was released backinto the marketplace. In 1998, by comparison, net absorption was 1.4 million sf, so last year's numbers could be considered an anomaly in the market.
The current trend in new construction in the county is large floorplate, class A office buildings. Most new product is being built in the airport and south county regions where vacancy rates are 8.1% and 8.4%,respectively. By contrast, the north county area currently has no new construction under way due largely to an almost 14% vacancy rate, Holdner says.
With the airport area almost out of available land, most new construction is flex-tech product in the Irvine Spectrum and Aliso Viejoareas of the south county region. The average asking price for leased space is $2.43 per sf in the airport area and $2.24 per sf in southcounty.
With a total of 84 million sf of office space for lease in the county, the report notes that 10.8 million sf, or about 13%, was available during the third quarter.
For a copy of the Voit report, e-mail a request to: [email protected] mailto:[email protected].
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